The effects of board and auditor independence on earnings quality: evidence from Italy

Ianniello, Giuseppe

doi:10.1007/s10997-013-9285-2

Cited by 32 publications

(28 citation statements)

References 49 publications

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“…Panel A in Table 2 shows that the absolute values of discretionary accruals, estimated utilizing the Kothari et al (2005) model (DACKO), have a mean (median) of 0.079 (0.054) and a standard deviation of 0.08, indicating that the total volume of earnings management is 7.9% (5.4%) of lagged total assets. These values are comparable with prior evidence from Jordan (Alzoubi, 2016) and other developing countries (Habbash and Alghamdi, 2017) as well as that from developed countries with weak investor protection regimes (Othman and Zeghal, 2006;Ianniello, 2015).…”

Section: Descriptive Statisticssupporting

confidence: 86%

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Does audit quality influence earnings management in emerging markets? Evidence from Jordan

Almarayeh¹,

Guzmán²,

Abdullatif³

2020

RC-SAR

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Este estudio investiga si algunos atributos de la calidad de auditoría son capaces de restringir la manipulación de resultados en un país en desarrollo, Jordania, cuyo contexto cultural, económico e institucional es muy diferente del contexto de los países analizados anteriormente. Se usó la regresión de mínimos cuadrados generalizada (GLS) para estudiar la asociación entre dos atributos de la calidad de auditoría (tamaño del auditor y honorarios de auditoría) y los ajustes por devengos discrecionales, como proxy de la manipulación de resultados, para una muestra de empresas industriales que cotizan en la Bolsa de valores de Amman durante el período 2012 - 2016. Los resultados son consistentes con la expectativa de que en los países emergentes la auditoría externa puede funcionar de manera diferente a la de los países anglosajones y de Europa occidental con respecto a su papel en la restricción de la manipulación de resultados e indican que, dado el entorno institucional en Jordania, el tamaño del auditor y los honorarios de auditoría no tienen un efecto significativo en la manipulación de resultados. Este estudio proporciona a los lectores información sobre si y cómo el entorno institucional influye en la relación entre la calidad de la auditoría y la manipulación de resultados. Además, presenta nueva evidencia sobre el efecto moderador del nivel de los honorarios de auditoría en su relación con la manipulación de resultados. Los resultados de este estudio podrían proporcionar información valiosa a los reguladores, tanto en Jordania como en otros países con un entorno económico e institucional similar, para prevenir las prácticas de manipulación de resultados. This study investigates whether some audit quality attributes are capable to restrict earnings management in a developing country, Jordan, whose cultural, economic and institutional context is very different from most previously analyzed countries’ context. Generalized least square regression (GLS) was used to study the association between two audit quality attributes (auditor size and audit fees) and discretionary accruals, as a proxy of earnings management, for a sample of industrial firms listed on the Amman Stock Exchange during the period 2012 – 2016. The findings are consistent with the expectation that in emerging countries external audit can function differently from that in Anglo-Saxon and West-European countries with regard to its role in restricting earnings management and indicate that, given the institutional environment in Jordan, auditor size and audit fees have no significant effect on earnings management. This study provides readers with information about if and how the institutional setting influences the relationship between audit quality and earnings management. Furthermore, it presents new evidence regarding the moderating effect of the level of audit fees on their relation with earnings management. This study’s findings could provide valuable information to regulators and standards setters, both in Jordan and other countries with a similar economic and institutional environment, which can help in preventing earnings management practices.

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Section: Descriptive Statisticssupporting

confidence: 86%

“…DACKO it = TA it -NDACKO it (3) Given that this research focuses on the magnitude rather than a particular direction of earnings management, the absolute value of discretionary accruals is utilized as the dependent variable (see Beck et al, 1988;Ianniello, 2015; Albersmann and Hohenfels, 2017).…”

Section: Measurement Of Variablesmentioning

confidence: 99%

Does audit quality influence earnings management in emerging markets? Evidence from Jordan

Almarayeh¹,

Guzmán²,

Abdullatif³

2020

RC-SAR

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“…Hence, whatever it is the degree of severity of an opinion, the minority shareholders are more confident toward official EAs than audit reports and their information content. Past researches focused on the issue of minority shareholder's trust from different perspectives suggest different solutions such as an increase of non-executive and/or independent directors (Fama & Jensen, 1983;Core, Guay, & Rusticus, 2006;Barontini & Bozzi, 2011;Ianniello, 2013) and several financial and non-financial incentive systems for managers (Pott, Tebben, & Watrin, 2014;Ye, 2014). Most of the time, these "remedies" failed in solving problems and conflicts.…”

Section: Findings and Discussionmentioning

confidence: 99%

Stock Market Reaction to Yearly Earnings Announcements for Firms in Financial Distress: Evidences from Italy

Carlino¹,

Brunelli²,

Giosi³

2018

JMAA

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The purpose of this paper is to feed the debate regarding investor's reaction to relevant financial information releases as yearly earnings announcements (EAs) with a specific focus on financial distressed firms. Using the event study methodology and adopting two well-known tests in the literature, we analyzed Italian listed companies in the period of 2008-2016, to detect whether there is a market reaction to EAs releases for firms in financial distress, adopting as a measure of financial distress the presence in the audit report of a going concern opinion (GCO). In the Italian legislation, the GCO must be communicated immediately to the market and this can be done before, simultaneously or after EAs. The achieved results shed light on the negative impact of EAs of distressed firms receiving a GCO. On the other hand, the possibility that negative abnormal returns are mainly due to the GCO release cannot be neglected. Hence, through additional tests, we found that effects of EAs are more persistent and significant than GCOs, in accordance with the prevailing literature, which sees, on average, EAs predominant information for investors. Our study is pioneering in disentangling possible effects of confounding events for the Italian stock market. The EAs superior effect confirms the dynamics characterizing weak and small equity markets as Italy where, before GCOs releases, some relevant and more precise information (such as earnings magnitude) is often held by shareholders because of the high percentage of family firms and/or concentrated ownership, demonstrating also the weakness of auditor profession if compared with other developed countries.

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“…Similarly, Hohenfels and Quick (2020) generally indicate a negative influence of NAS on audit quality (except from tax services which do not confirm this relationship). According to Ianniello (2015), NAS appear to be positively associated with the absolute abnormal working capital accruals which suggests a lower quality of earnings. On the other hand, Garcia-Blandon, Argiles and Ravenda (2020) present an opposite view and do not confirm a significant relationship between NAS and audit quality.…”

Section: Nas and Audit Qualitymentioning

confidence: 97%

The Audit Reform and Non-Audit Services in the Light of the Big-4 Transparency Reports – the EU Perspective

Indyk¹

2020

AEF

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The aim of this article is to compare and contrast three different approaches towards non-audit services (henceforth “NAS”) based on: 1) researchers’ views, 2) the EU regulation, and 3) the provision of NAS by the Big-4 firms operating in twenty-seven EU member states. Therefore, the article includes: (i) a literature review of various NAS aspects, (ii) an analysis of the EU reform in terms of NAS, and (iii) an empirical analysis of NAS fees which have been disclosed in the Big-4 transparency reports for the period 2017-2019.The literature review shows: a) lack of consensus between researchers about the potential consequences of the NAS provision in general, b) quite limited or little evidence of the consequences of the NAS restrictions as part of the EU audit reform, c) ambiguity in terms of the NAS definition itself which results mainly from insufficient NAS disclosures and lack of a detailed NAS split.The EU regulators addressed these concerns only in very narrow aspects, i.e., through: (1) the NAS black list, (2) the NAS cap, and (3) the strong emphasis on public-interest entities (henceforth “PIEs”). What is more, NAS disclosure requirements in the transparency reports are limited only to two categories.Finally, the results of the empirical study indicate the significant differences at the NAS fee level among the EU member states. The analysis shows a particular importance of NAS fees from other clients as a substantial revenue stream for the Big-4 firms. The results suggest also a significant increase in this category in 2018 when NAS fees from other clients increased by net EUR809 million (13%). However, this strong trend was not confirmed in the following year.All in all, the study underlines deficiency in proper NAS disclosure and reporting which might be observed also in the case of transparency reports. All findings of this study may be another argument for regulators to address the problem of NAS in more detail starting from their advice on a NAS taxonomy which might be used then as a point of reference. It would be also beneficial for researchers exploring the NAS aspect and, thus, may enhance data and results comparability between studies. Additional disclosure requirements like NAS provided to PIEs or a recurring or non-recurring character of NAS would also support the better understanding and evaluation of the consequences of the EU audit reform.

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The effects of board and auditor independence on earnings quality: evidence from Italy

Cited by 32 publications

References 49 publications

Does audit quality influence earnings management in emerging markets? Evidence from Jordan

Does audit quality influence earnings management in emerging markets? Evidence from Jordan

Stock Market Reaction to Yearly Earnings Announcements for Firms in Financial Distress: Evidences from Italy

The Audit Reform and Non-Audit Services in the Light of the Big-4 Transparency Reports – the EU Perspective

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